Cost of Greek bailout extension put at €15bn

Greece would need €13-15 billion more in funding if it were given a two-year extension to its bailout plan, its finance minister said on Tuesday, the first time Athens has put a price tag on its plea for more time to get its finances in order.

The recession-battered country may also ask the European Central Bank to help it meet its goals by rolling over Greek bonds it holds rather than cashing them in.

The new conservative-led government has drawn a cold public response from northern European countries for its request for more time to push through austerity cuts so that its economy has some room to recover.

Athens has won the backing of France’s government on the issue, but others are wary of an ever-rising bill to save twice-bailed out Greece. Many privately acknowledge such an extension may be unavoidable, however,

“We estimate the funding gap that would be created if we get the two-year extension at €13-15 billion," Finance Minister Yannis Stournaras told Reuters at his office in central Athens, adding that the gap could be bridged without seeking more aid.

Greek officials have previously said such a gap could be covered through issuing short-term debt or seeking lower interest rates - avoiding forcing euro zone governments to stump up more money for Greece.

Athens could also ask the ECB to roll over its Greek bonds to help Athens plug any financing gaps from a budget shortfall or lower than expected privatisation revenue, Deputy Finance Minister Christos Staikouras said in a September 19 document released on Tuesday.

Nevertheless, there is growing speculation that even without any extension Greece, which has been in recession for five years, will need more funding to get its debt down to below the targeted 120 per cent of gross domestic product by 2020.

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Paralysed by repeat elections and delays in implementing reforms, Greece is way off track in meeting targets under its bailout and will likely require a second debt restructuring, EU officials told Reuters in July.

Some officials estimated the country could need an additional €20-40 billion to get back on track - a figure also mentioned by German newspapers in recent days as among the preliminary findings of an ongoing review by lenders.

An EU official acknowledged on Tuesday that Greece was off-track, but said the size of the gap was yet to be determined.

“The fact is, we won’t know the precise figure until the troika report is finished. Until then, it is speculation."

Greece’s EU and IMF lenders are due to release a keenly awaited report within weeks giving their assessment of the country’s progress in meeting the terms of its bailout.

Stournaras did not comment on Greece’s financing needs beyond those required for any extension of its bailout, but he denied reports suggesting the fiscal gap had widened.

He confirmed that the country’s fiscal shortfall based on its 2013 and 2014 targets remained at €13.5 billion - the value of spending cuts and tax reform measures Athens has been discussing with its EU and IMF lenders for weeks.

“At the end of 2014 we will re-evaluate the fiscal gap," Stournaras said. “But we estimate that there will be no change to the figures we have now."

That EU and IMF report is expected to determine whether the country will get its next tranche of aid to avoid bankruptcy as well as whether it merits additional time to meet its targets.

Entirely reliant on aid, Greece would face certain default and a potential euro zone exit without further bailout money. But European appetite to cut it loose has sharply receded in recent weeks as the bloc tries to prevent any shocks that destabilise larger, struggling economies like Italy and Spain.